Skip to main content
IFRS Academy

CERTYNEX IFRS ACADEMY

My account — Professional

Search the Academy

Home
My learning path
Exercises & quizzes
Cases
Workpapers
Exams
My progress

Cases

Practical case

Practical caseIAS 34L2 · Intermediate

Year-to-date measurement: same policies, seasonal revenues, uneven costs, estimates and materiality

9 documents11 tasks≈ 60 min
0 / 13 items completed
Standards
IAS 34 — Interim Financial Reporting
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Estivale SA (fictitious entity), a maker of garden furniture whose activity is highly seasonal, closes its accounts on 31 December and publishes a report at the end of each quarter. You prepare the report for the second quarter of 20X6 (period ended 30 June 20X6). The chief financial officer proposes five treatments: a revenue recognition method simpler than at year-end, smoothed revenue, the deferral of a repair, the early recognition of a maintenance shutdown and no note on a dispute settlement.

Your assignment

Say whether the proposed simplified method for recognising revenue is allowed; compute second-quarter revenue from the year-to-date amounts; judge the smoothed revenue; compute the half-year profit before tax; record the correction of the deferral of the repair and present its effect; reconcile the year-to-date amount presented with the recomputed one; judge the early recognition of the maintenance shutdown; assess the reliability of the inventory estimates; assess the significance of the dispute settlement; conclude. One document is not useful.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Intermediate level: help remains available, on demand.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 9 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 13) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

9 documents: open each one to read it.

Document 1Memo

Company profile and case conventions

Estivale SA (fictitious entity) makes garden furniture; it closes its accounts on 31 December and publishes a report at the end of each quarter; its functional currency is the euro. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to the standard): management uses an internal threshold of 5% of the pre-tax profit of the period to decide on a dedicated note; the pre-tax profit of each quarter is given after correction of the deferral of the repair; the entry is illustrative and uses generic expense and asset accounts.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
June deliveries invoiced in July€185,000.00
Year-to-date revenue at 31 March€1,180,000.00
Year-to-date revenue at 30 June€3,460,000.00
Pre-tax profit of the first quarter€95,000.00
Pre-tax profit of the second quarter€405,000.00
Year-to-date pre-tax profit presented in the draft€560,000.00
Cost of the repair€60,000.00
Cost of the maintenance shutdown€180,000.00
Forecast annual revenue€7,900,000.00
Smoothed revenue per quarter€1,975,000.00
Amount of the settlement€35,000.00
Forecast annual pre-tax profit€1,000,000.00
Internal threshold of management (case convention)5%

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort9

  • Company profile and case conventions

  • Accounting policies and proposal of the chief financial officer

  • Year-to-date amounts and quarterly results of 20X6

  • Invoice for the repair of the motor of the painting line

  • Annual maintenance shutdown

  • Seasonality and smoothed revenue

  • Measurement of inventories at 30 June

  • Settlement of a dispute with a customer

  • Transport offers

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      11 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Is the method of recognising revenue at invoicing proposed for the interim report allowed?

      2. Task 2Calculation

        Compute second-quarter revenue from the year-to-date amounts.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute second-quarter revenue from the year-to-date amounts.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Professional judgement

        Can the proposed smoothed revenue be presented for the second quarter?

      4. Task 4Calculation

        Compute the half-year profit before tax from the quarters.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the half-year profit before tax from the quarters.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Journal entries

        Record the correction of the deferral of the repair.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      6. Task 6Calculation

        Reconcile the opening year-to-date amount, the profit of the quarter and the year-to-date amount presented in the draft.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Reconcile the opening year-to-date amount, the profit of the quarter and the year-to-date amount presented in the draft.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Control difference (560,000 − 500,000)

      7. Task 7Professional judgement

        Can half of the cost of the August maintenance shutdown be recognised in the first half?

      8. Task 8Analysis

        Does the use of estimates for inventories make the interim report unreliable?

      9. Task 9Professional judgement

        Is the dispute settlement significant against the data of the interim period?

      10. Task 10Effects on the financial statements

        What is the effect of the correcting entry on the financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      11. Task 11Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 13).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 34 §28
      • IAS 34 §30
      • IAS 34 §41